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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number: 33-55254-11
FORLINK SOFTWARE CORPORATION, INC.
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(Exact name of small business issuer as specified in its charter)
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NEVADA 87-0438458
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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FANG YUAN MANSION 9F, BAISHIQIAO ROAD NO. 54, HAIDIAN DISTRICT, BEIJING, CHINA
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(Address of principal executive offices)
011-8610 88026368
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(Issuer's telephone number)
94 RUE DE LAUSANNE, CH1202 GENEVA, SWITZERLAND
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: AS OF AUGUST 7, 2000, THE ISSUER HAD
25,400,000 SHARES OF COMMON STOCK, $.001 PAR VALUE, OUTSTANDING.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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INDEX
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PART I - FINANCIAL INFORMATION PAGE
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ITEM 1. FINANCIAL STATEMENTS.
F-1
Forlink Software Corporation, Inc.
June 30, 2000 and 1999
Consolidated Balance Sheets
December 31, 1999 and
June 30, 2000 (unaudited) F-2
Consolidated Statements of Income
for the three months ended June 30, 2000 and 1999 (unaudited)
for the six months ended June 30, 2000 and 1999 (unaudited) F-3
Consolidated Statements of Cash Flows
for the six months ended June 30, 2000 and 1999 (unaudited) F-4
Notes to Consolidated Financial Statements (unaudited) F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS 2
PART II - OTHER INFORMATION 4
SIGNATURES 5
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FORLINK SOFTWARE CORPORATION, INC.
UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
F-1
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Forlink Software Corporation, Inc.
Consolidated Balance Sheets
(Expressed in US Dollars)
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June 30, December 31,
2000 1999
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(Unaudited) (Audited)
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ASSETS
Current assets
Cash and cash equivalents $ 470,808 $ 856,233
Accounts receivable 145,097 1,690
Other receivables, deposits and prepayments 170,555 17,044
Inventories 96,354 34,286
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Total current assets 882,814 909,253
Plant and equipment, net 188,359 43,792
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Total assets $ 1,071,173 $ 953,045
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts due to stockholders $ 83,345 $ 120,773
Other payables and accrued expenses 867,712 560,476
Other taxes payable 5,415 1,100
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Total current liabilities 956,472 682,349
Commitments and contingencies
Shareholders' equity
Common stock, par value $0.001 per share;
100,000,000 shares authorized;
25,000,000 issued and outstanding 25,000 25,000
Additional paid-in capital 250,630 250,630
Retained earnings/(Accumulated losses) (160,929) (4,934)
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Total shareholders' equity 114,701 270,696
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Total liabilities and shareholders' equity $ 1,071,173 $ 953,045
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See accompanying notes to unaudited consolidated condensed financial statements.
F-2
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Forlink Software Corporation, Inc.
Consolidated Statements of Operations
(Expressed in US Dollars)
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Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Net sales $ 163,664 $ 7,432 $ 375,771 $ 9,129
Cost of sales (108,537) (1,970) (198,626) (2,033)
------------ ------------ ------------ ------------
Gross profit 55,127 5,462 177,145 7,096
Selling expenses (35,839) (2,683) (87,632) (4,175)
General and administrative
expenses (188,459) (6,164) (251,380) (10,158)
------------ ------------ ------------ ------------
Operating income/(loss) (169,171) (3,385) (161,867) (7,237)
Interest income 4,451 108 4,771 691
Other income, net -- -- 1,101 --
------------ ------------ ------------ ------------
Income/(loss) before income tax (164,720) (3,277) (155,995) (6,546)
Provision for income tax -- -- -- --
------------ ------------ ------------ ------------
Net income/(loss) $ (164,720) $ (3,277) $ (155,995) $ (6,546)
============ ============ ============ ============
Earnings per share
- basic and diluted $ -- $ -- $ -- $ --
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted 25,000,000 20,000,000 25,000,000 20,000,000
============ ============ ============ ============
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See accompanying notes to unaudited consolidated condensed financial statements.
F-3
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Forlink Software Corporation, Inc.
Consolidated Statements of Cash Flows
Increase/(Decrease) in Cash and Cash Equivalents
(Expressed in US Dollars)
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Six Months Ended
June 30,
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2000 1999
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(Unaudited) (Unaudited)
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Cash flows from operating activities
Net income/(loss) $(155,995) $ (6,546)
Adjustments to reconcile net income/(loss)
to net cash used in operating activities
Depreciation of plant and equipment 8,467 3,886
Change in:
Accounts receivable (143,407) --
Other receivables, deposits and prepayments (153,511) (81)
Inventories (62,068) (7,586)
Accounts payable -- (57)
Other payables and accrued expenses 7,236 (455)
Other taxes payable 4,315 42
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Net cash used in operating activities (494,963) (10,797)
Cash flows from investing activities
Acquisition of plant and equipment (153,034) (26,443)
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Net cash used in investing activities (153,034) (26,443)
Cash flows from financing activities
Loan received from a potential investor 300,000 --
Capital contribution by a stockholder -- 630
Repayment to stockholders (37,428) --
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Net cash provided by financing activities 262,572 630
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Net decrease in cash and cash equivalents (385,425) (36,610)
Cash and cash equivalents at beginning of period 856,233 88,964
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Cash and cash equivalents at end of period $ 470,808 $ 52,354
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See accompanying notes to unaudited consolidated condensed financial statements.
F-4
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Forlink Software Corporation, Inc.
Notes to Consolidated Financial Statements
(Expressed in US Dollars)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial data as of June 30, 2000 and for the three and six
months ended June 30, 2000 and 1999, have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Company's audited annual financial statements for the year ended
December 31, 1999.
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.
In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of June 30, 2000 and for the three and
six months ended June 30, 2000 and 1999, have been made. The results of
operations for the three and six months ended June 30, 2000 and 1999 are not
necessarily indicative of the operating results for the full year.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
Operation Lease Commitment
As of June 30, 2000, the Company had commitments under non-cancellable operating
lease expiring in excess of one year amounting to $403,351. Rental payments for
each of the succeeding periods are:
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July 1, 2000 to June 30, 2001 $242,011
July 1, 2001 to June 30, 2002 161,340
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$403,351
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NOTE 3 - STOCK PLAN
On June 1, 2000, the stockholders of Company approved a plan of stock-based
compensation incentives for selected eligible participants of the Company and
its affiliated corporations. This plan is known as the "Forlink Software
Corporation, Inc. Stock Plan" (the "Plan"). The total number of shares of common
stock reserved for issuance by the Company either directly as stock awards or
underlying options granted under this Plan shall not be more than 1,600,000.
Under terms of the Plan, options can be issued to purchase shares of the
Company's common stock. The Board of Directors shall determine the terms and
conditions of each option granted to eligible participants, which terms shall be
set forth in writing. The terms and conditions so set by the Board of Directors
may vary from one eligible participant to another. Currently, the offering price
of all shares of common stock being registered under this Plan is not known.
F-5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this Form
10-QSB. Except for the historical information contained herein, the discussion
in this Form 10-QSB contains certain forward looking statements that involve
risks and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward statements wherever
they appear in this Form 10-QSB. The Company's actual results could differ
materially form those discussed here.
The financial statements include all adjustments which in the opinion of and to
the best of management's knowledge are necessary to make the financial
statements not misleading.
As discussed in the Company's annual report filed on Form 10-KSB, on November 3,
1999, the Company completed the reverse acquisition of Beijing Forlink Software
Technology Co. Ltd. ("BFST"). 100% of the registered share capital of BFST was
acquired by the Company, in exchange for 20,000,000 shares of the Company's
$0.001 par value common stock, plus a cash consideration of Renminbi (RMB)
1,000,000. After issuing 20,000,000 shares of the common stock to the original
owners of BFST, the Company has a total of 25,000,000 shares of common stock
issued and outstanding. Effective December 6, 1999, the Company's name was
changed from Why Not?, Inc. to Forlink Software Corporation, Inc.("Forlink").
The Company is engaged in the internet software system development business, and
the internet vertical portal business. The business of BFSTC has become the
business of the Company.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999,
and Six Months Ended June 30, 2000 Compared to Six Months End June 30, 1999.
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Three Months ended Six months ended
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June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
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Net sales $163,664 $7,432 $375,771 $9,129
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Net sales were derived principally from Forlink brand "for-series" internet
software tools sales, internet software system integration, online software
sales and web advertisement.
The increase of revenues was primarily attributable to marketing efforts and
increased "for-series" brand awareness. Our "for-series" internet software tools
can support our customers to build a business web site within a short period of
time. Our "for-series" internet software tools are accepted by a considerable
number of customers in the People's Republic of China ("PRC"), such as Legend
Computer Co., Ltd., Zhaodaola.com, Industrial and Commercial Bank of China,
jbde.com.cn, newpalm.com, palm365.com, ccidnet.com, fm365.com, etc.
During the second quarter of 2000, the Company mainly accomplished recruiting
technical and market employees and expanding the functions of "for-mail" and
"for-search". Although the change of the Company's office site during the second
quarter period had created inconvenience to daily operations, which contributed
to the decrease in sales in comparison with the first quarter of 2000, the
Company is now settled in its new offices and management intends to focus on
increasing future sales.
Cost of services was consisted principally of salary for internet technicians,
costs of promotion, system sales and integration, rent of office, depreciation
and other associated costs relating to the delivery of services.
The increase in cost of sales was because of the increase in the purchases of
computer related components from third parties and demands for sales. The
increase in selling expenses was because of the increase in the number of
employees in the departments of sales and customer service departments. The
increase in general and administrative expenses was because of the increase in
salary of employees at the management level, office moving cost and increased
rental expenses of $48,000 and advertising expenses of approximately $56,000
during this quarter. The number of employees was increased from 15 as of June
30, 1999 to 54 as of June 30, 2000. The Company has also
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undertaken an aggressive marketing strategy, which includes launching a net
flash program on China Central TV channel and another 12 TV channels. In order
to recruit experienced computer engineers/technicians, the Company has to
increase the staff salary to a competitive market level.
LIQUIDITY AND CAPITAL RESOURCE
During the first 6 months of 2000 the net decrease in cash and cash equivalent
was $385,425. The net cash used in operating activities was $494,963. In order
to cope with business growth, the Company used $153,034 for the acquisition of
plant and equipment.
In order for the Company to meet its continuing cash requirements and to
successfully implement its growth strategy, the Company will need to rely on
increased future revenues and/or will require additional financing. In the event
additional financing is required, no assurances can be given that such financing
will be available in the amount required or, if available, that it can be on
terms satisfactory to the Company.
MANAGEMENT OF GROWTH
As an internet software tools development Company, the Company stands in a
unique position in the growing Internet market in the PRC. The Company has
developed "for-series" internet tools, "for-mail", "for-search" etc. These
products are used by a considerable number of reputable companies in the PRC.
If the Company is successful in implementing its growth strategy, the Company
believes it can undergo a period of rapid growth. The Company will focus on
"for-mail" and "for-search" development and marketing promotion. The Company
will develop "for-mail" and "for-search" in depth and, based on these two
products, develop software application for users in the finance and banking
industrial sector and certain government departments such as the Public Security
Bureau. The Company is trying to integrate its "for-mail" and "for-search" for
use with two influential Chinese wireless sites.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None.
ITEM 2. CHANGES IN SECURITIES.
As previously described in the Form 10-QSB for the quarter ended March
31, 2000, the Company commenced a private placement of up to ten units of its
securities, each unit consisting of 200,000 shares of common stock and 200,000
common stock purchase warrants, at a price of $800,000 per unit. In July 2000,
the Company issued 200,000 shares and a warrant to purchase 200,000 shares at an
exercise price of $6.00 per share, to one accredited investor in connection with
the purchase of one unit in January 2000.
This transaction did not involve a public offering, no sales
commissions were paid, and a restrictive legend was placed on each certificate
evidencing the shares and on the warrant. The Company believes that this private
placement is exempt from registration pursuant to Sections 4(2), 4(6) and/or
Rule 506 of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - None.
ITEM 5. OTHER INFORMATION.
On June 1, 2000, the Company adopted the Forlink Software Corporation,
Inc. Stock Plan, (the "Plan") which covers the issuance of up to 1,600,000
shares of common stock, either directly or pursuant to options, to eligible
employees, directors, officers, consultants and advisors of the Company. The
purpose of the Plan is to promote the best interest of the Company and its
stockholders by providing a means of non-cash remuneration to selected eligible
participants. On July 19, 2000, the Company filed a registration statement on
Form S-8 (File No. 333-41700) to register the shares covered under the Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit Number and Brief Description.
2.1 Plan of Reorganization dated November 3, 1999 (Incorporated by
reference to Exhibit No. 2.1 of the current report on Form 8-K
dated November 3, 1999, and filed November 18, 1999.)
2.2 Addendum to the Plan of Reorganization dated November 3, 1999.
(Incorporated by reference to Exhibit No. 2.2 of the current
report on Form 8-K/A-2 dated November 3, 1999, and filed March
31, 2000.)
3.1 Articles of Incorporation, as amended and currently in effect.
(Incorporated by reference to Exhibit No. 3.1 of the Form
10-QSB for the quarter ended March 31, 2000, and filed on May
13, 2000.)
3.2 Bylaws dated May 11, 2000. (Incorporated by reference to
Exhibit No. 3.2 of the Form 10-QSB for the quarter ended March
31, 2000, and filed on May 13, 2000.)
10.1 Forlink Software Corporation, Inc. Stock Plan dated June 1,
2000. (Incorporated by reference to Exhibit 10.1 of the
Company's Registration Statement on Form S-8 (file no.
333-41700) filed July 19, 2000.)
27 Financial Data Schedule. (Filed herewith.)
(b) Reports on Form 8-K - None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FORLINK SOFTWARE CORPORATION, INC.
By: /s/ Liang Che
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Liang Che, CEO and CFO
Date: August 10, 2000
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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2.1 Plan of Reorganization dated November 3, 1999 (Incorporated by
reference to Exhibit No. 2.1 of the current report on Form 8-K
dated November 3, 1999, and filed November 18, 1999.)
2.2 Addendum to the Plan of Reorganization dated November 3, 1999.
(Incorporated by reference to Exhibit No. 2.2 of the current
report on Form 8-K/A-2 dated November 3, 1999, and filed March
31, 2000.)
3.1 Articles of Incorporation, as amended and currently in effect.
(Incorporated by reference to Exhibit No. 3.1 of the Form
10-QSB for the quarter ended March 31, 2000, and filed May 13,
2000.)
3.2 Bylaws dated May 11, 2000. (Incorporated by reference to
Exhibit No. 3.2 of the Form 10-QSB for the quarter ended March
31, 2000, and filed May 13, 2000.)
10.1 Forlink Software Corporation, Inc. Stock Plan dated June 1,
2000. (Incorporated by reference to Exhibit 10.1 of the
Company's Registration Statement on Form S-8 (file no.
333-41700) filed July 19, 2000.)
27 Financial Data Schedule. (Filed herewith.)
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